Indo-China Trade Relationship in Last Quarter Century: An Empirical Analysis

Abstract

Purpose: The study tries to find pattern in the bilateral trade and impact of macro happenings like GFC, Chinese meltdown, Galwan conflict, COVID-19 on it over the period of 1995 to 2020. Design/Methodology/Approach: The study has two dimensions. The first one analyses the monthly export and import figures between India and China product wise (based on HS Code at two-digit level) from Jan2016 to Jan 2021 whereas second one focus on annual data of Indo-China Export and Import along with their annual GDP for 26 years starting from 1994-1995 to 2019-2020. Bilateral trades are analysed by using four tools namely- Bilateral Trade Dependence Index (BTDI); Trade Intensity Index (TII); Herfindahl Hirschmann Market Concentration Index (HHI); and Index of Export market penetration (IEMP). The study has also used Time series analysis to find the relationship between total bilateral trade and GDP of respective countries using Johansen Cointegration Test, Granger Causality Test, and VAR model. Findings: The annual growth rate of import and export for India with China suggest the short-term impact of macro happenings. Research Limitations: The study has several limitations with respect to availability of very recent data, availability of cost components of trade items in respective countries etc. Managerial Implications: Policy makers for India are suggested to work towards import substitution via various programs like Make-in-India with priority of domestic productions of HS Code 85, 84, 29 which are increasing the trade deficit continuously. Originality/Value: This study is an original effort to highlight the dynamic bilateral trade relationships between India and China in last twenty-five years.